Consumer Safety is the New Pillar Industry

Sign up for the ChinaSolved newsletter.

China has never been shy about putting national security policy ahead of corporate profits, but in the past government protected “pillar industries” were in line with PRC initiatives to develop heavy industry and capital investment. Now that the economy is being rebalanced to focus on consumption and services, it is not surprising that Beijing is putting the screws to MNCs that have successfully built up market share at the expense of domestic industries that were fragmented, inefficient – and often dangerous.

Competitor of My Competitor – Competitor or Potential Partner

If the commentators are right and China’s new anti-trust zeal is aimed at breaking the hammerlock that some MNCs have over segments of the Chinese market, then there may be opportunity for new entrants to the China market. In a struggle between giants, the quick and nimble may profit (assuming they don’t get crushed under foot).
Let’s face facts – the Chinese government may or may not have a point that MNC giants are unfairly monopolizing the market for pharmaceuticals, powdered milk, or whatever consumer product Beijing looks at next, but that doesn’t mean that Chinese consumers will immediately start trusting local brands. In fact, this may the perfect opening for new international brands or JVs to exploit a disruption in the market.

A decelerating Chinese economy means that consumers are going to start allocating capital more carefully – not going into spending lockdown or going low-end. (Stop Bleaking Out about the Chinese Economy ) I’m sensing an “end to the China Story” theme in the established media – and that’s great news for smart marketers who have been looking to enter or expand in China. This time around, pick the right partner, develop goals that make sense, and look for openings left by disruptive shifts – thanks to the government.

Partnerships Are Back

Heros hook up while the giants battle.

Keys to benefiting when giants battle:

• Picking good local partners is key. In China, market opportunity means nothing if your new partner is just out to steal your technology and business methods.
• Make it easy for customers to say yes. Figure out what the Chinese consumer likes about the Western brand, and be more of the same. Chinese like overseas brands for safety, reliability, purity. Don’t try introducing anything new to the mix. You should be about protecting the children.
• Niches get Riches. Anti-trust moves dovetail perfectly with 2nd & 3rd tier marketing strategies. If you have been squeezed off the shelves in the big city distribution channels, this is a great opportunity to take a look at China’s burgeoning 2nd tier – as well as the rapidly urbanizing 3rd & 4th tier towns.

Anti-trust activity is definitely bad news for giant MNCs who have spent years educating the Chinese market about premium products and high quality – but it may be a great opportunity for overseas investors who are willing and able to form the right partnerships.